Stamp duty is an important reason why housing transactions have collapsed from
a peak of more than 210,000 a year in the late 1980s to roughly half that
level today

If you believe that motorists are the only ones being hammered by the tax system, it’s time to think again. Homeowners are also being fleeced. Stamp duty receipts surged back over the £1bn-a-month mark for the first time since before the financial crisis, hitting £1.093bn in July, up 24pc from a year ago.

As an analysis from Citigroup points out, stamp duty receipts briefly breached the £1bn monthly level in the middle of 2007, before collapsing to just £213m a month in March 2009, as a result of a dramatic decline in both house prices and housing transactions.

Michael Saunders, Citi’s chief economist, put the statistics in context: stamp duty now brings in half the £2.2bn collected by petrol tax, up from just 19pc in 2009. As the housing market continues to recover, and prices to rise, revenues will go up further, levying a massive and vicious tax on property owners that will eventually come to rival that grabbed from motorists.

Stamp duty has several intriguing properties. It is hard to work out exactly who ends up paying it – in other words, its incidence. Economists argue that while the cash is handed over physically by homebuyers, it is actually homesellers who end up bearing the real cost and are impoverished as a result. The reason is that stamp duty depresses selling prices: the overall market price, determined by the forces of supply and demand, includes stamp duty, so the portion that remains for homesellers falls each time stamp duty is hiked.

The levy has another effect: it dramatically reduces liquidity in the housing market. People who wish to buy a house now need to find a massive chunk of cash that cannot be borrowed, in addition to the deposit. This depresses prices too, and also drastically reduces geographical mobility, making it harder for people to move. The economic consequences of that are self-evidently appalling; by reducing growth, productivity, jobs and pay, this in turn damages the growth of tax receipts generated in the rest of the economy.

Stamp duty is an important reason why housing transactions have collapsed from a peak of more than 210,000 a year in the late 1980s to roughly half that level today. Arthur Laffer, author of the eponymous curve, made his name by highlighting instances when cutting tax rates actually increased tax receipts by boosting economic activity; stamp duty is almost certainly one such area. Ideally, a future government would go even further and scrap the daft tax altogether.

In the meantime, George Osborne’s July public finance numbers were grim though not entirely catastrophic. The main problem is that the deficit is continuing to widen: adjusted public sector net borrowing from April to July 2014 reached a horrifyingly large £37bn, even higher than last year’s £35.2bn. So much for the rhetoric of austerity. But there were rays of light at the end of the tunnel for the Chancellor: central government revenues rose by 3.3pc in July, pay-as-you-earn income tax jumped 6.4pc and income tax from self-assessment (which affects freelancers and high earners) rose 3.8pc.

But the Chancellor’s big problem is that pay rises are set to remain extremely weak for much longer than anybody had predicted. This will significantly depress revenues for the remainder of the year and into 2015 – at least compared with what the Government had been hoping. There is simply no way that the exchequer’s current revenue targets will be met, even if the jobs boom continues and the economy shrugs off eurozone woes. For Mr Osborne, the problem is stark: he will find it hard to cut taxes before the election, at least if he listens to most mainstream economists.

But there is a solution, of course, and that would be to slash levies that are counter-productively high, such as stamp duty. Will he dare to launch a fresh wave of Laffer-style tax cuts, inspired perhaps by his sharp pro-growth reductions to corporation tax? We must certainly hope so.